Whether buy-to-let or buy-to-sell, it has long been the case that the property has been the safest and most valuable investment possible in the UK. Since the financial crisis in 2007 and 2008, where the housing market slipped significantly, there have been many years of steady growth in property prices. This has been especially true in London where the average price paid for a property has risen to more than £620,000 according to Zoopla.
But surely the seemingly inflated London housing market can only go on rising for so long. This has led many analysts to wonder whether London is still a smart place to invest in property. Dakota Murphey takes a look at some of the key factors to establish whether it is a good idea for you to invest in London property.
Growth is still forecast but has slowed
A report from Countrywide predicts that house prices will rise 1.5 per cent this year, followed by a further 2 per cent next year and an additional 3 per cent by the end of 2019. This means that while we will still see growth, it has slowed significantly from the last few years. London and the South East are still predicted to rise at a faster rate than the rest of the UK, however, which makes the capital one of the smartest places to invest.
It is more important than ever to invest in a survey
As the market has slowed down significantly it effectively means that London property investments can still be successful and profitable – you just need to take care to ensure that you are making the right investment. One important aspect of this, often overlooked by investors, is that you need to have any property you are buying surveyed.
A survey can reveal faults and potential problems with a property that will require significant financial input to deal with. This can eat away at any profit you can make from the investment. Have a survey carried out by a company like Daily Move, who specialise in London properties.
The Brexit effect
Clearly one of the major issues affecting the current property market is Brexit. The UK’s exit from the European Union has created a great of uncertainty about the economic prospects of the country. This is influencing a huge range of factors on the economy which are making growth stagnate. With fewer people looking to make London their home over the coming years there has been a cooling of demand for properties in the capital.
One report from Zoopla indicated that properties across the capital were having to slash their prices in order to make a sale. As many as 36 per cent of homes for sale in London had their price reduced, which is thought to be as a direct result of Brexit.
Rule changes having an impact
It is also worth pointing out that is not just Brexit that is affecting the housing market in London. Buy-to-let landlord purchasers have been discouraged from buying with a raise is the Stamp Duty Land Tax. However, this has seen a larger number of first-time and second-time buyers – together accounting for more than 44 per cent of the total homes sold since the new rules were introduced whereas landlords buying to let account for just 13 per cent.
The fortunes of luxury property
One area that has been relatively weak is the luxury section of the market. Luxury homes are forecast to fall in value by 4 per cent this year, according to a report from Savills. The report indicates that Brexit uncertainty is causing the challenges in the market. However, it is also believe that once the uncertain period is over, the market should recover and begin to rise again, with the value predicted to raise by up to 8 per cent in 2020.
It’s also worth noting that while parts of the country are struggling under the effects of Brexit uncertainty, London properties are still very popular with foreign investors. In fact, London mayor Sadiq Khan recently revealed he was concerned by the number of foreigner investors buying homes that are suitable for first-time buyers in Britain.